Former Chase Bank Officer Convicted in SAR Bribery Case

January 12, 2011

Frank E. Mendoza, 45, worked for Chase Bank as a loss mitigation specialist -- oh, how the financial services industry loves to come up with these fancy-schmanzy titles.  Essentially, a loss mitigation specialist is supposed to head off or contain potential trouble for the bank, particularly when a subpar or nonperforming asset can be converted into a performing one or salvaged for something. Among the arrows in the quiver of these specialists are loan modifications, short sales, foreclosures, etc. 

The United States Attorney for the Central District of California alleged that in his capacity as a loss mitigation specialist for Chase Bank, Mendoza conducted an investigation of a delinquent borrower on mortgage loans made in relation to seven properties. In the fall of 2008, Mendoza reported to Chase that he suspected fraud in relation to the mortgages, and in late November 2008, the bank filed a suspicious activity report (SAR) with The Financial Crimes Enforcement Network (FinCEN), a bureau within the Treasury Department.

What's FinCEN? The Financial Crimes Enforcement Network is a bureau within the Treasury Department charged with protecting the U.S. financial system from criminal abuse. FinCEN administers the Bank Secrecy Act, which is the federal anti-money laundering and counter-terrorism financing statute. The Bank Secrecy Act and FinCEN regulations require certain financial institutions, including all banks, to have Anti-Money Laundering programs in place and to report suspicious transactions and large currency transactions.

What's An SAR?  All financial institutions operating in the United States are required to prepare and file a SAR if they discover

  • Any known or suspected Federal criminal violation that is committed or attempted against the financial institution or conducted through the financial institution, where the institution is victimized or used to facilitate a criminal transaction, and the institution has a substantial basis for identifying one of its insiders as having committed or aided the act - regardless of the amount involved.
  • Violations aggregating $5,000 or more where a suspect can be identified.
  • Violations aggregating $25,000 or more regardless of a potential suspect.
  • Transactions aggregating $5,000 or more that involve potential money laundering or violations of the Bank Secrecy Act.
  • The transaction involves funds derived from illegal activities or is intended/conducted to hide/disguise funds/assets derived from illegal activities as part of a plan to violate or evade any law or regulation or to avoid any transaction reporting requirement under Federal law;
  • The transaction is designed to evade any regulations promulgated under the Bank Secrecy Act; or
  • The transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the financial institution knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.

NOTE: The Bank Secrecy Act prohibits the filer of a SAR from notifying any person involved in the suspicious transaction that the transaction has been reported or of the existence of the SAR.

Head's Up

In May 2009, several months after reporting the suspicious activity and following Chase's filing of an SAR,  Mendoza approached the borrower and solicited a $25,000 bribe in exchange for Mendoza's assistance with Chase and a possible federal criminal investigation related to the delinquent loans. In these conversations, Mendoza disclosed the filing of the SAR by Chase and asserted that a federal criminal investigation of the borrower was imminent. 

Talk Into the Rearview Mirror Please

Unfortunately for Mendoza, the borrower quickly reported the bribery solicitation to the Federal Bureau of Investigation (FBI). After the borrower delayed paying any bribe money, Mendoza ultimately agreed to accept $10,000 in cash.

During two meetings in the borrower's car in a mall parking lot, the borrower made two $5,000 payments to Mendoza. Following the second payment on June 29, 2009, special agents with the FBI arrested Mendoza, recovered the second $5,000 payment, and recovered from Mendoza's wallet two $100 bills that were part of the first bribe payment.

Jury Verdict

Following a one-week trial, on January 10, 2011, after a mere 30-minutes of deliberation, a federal jury in United States District Court in California found Mendoza  not guilty of the charge of attempted economic extortion, but the jury found him guilty of disclosing the existence of the SAR, demanding  a $25,000 bribe, ultimately accepting $10,000 in bribes from the customer, and subsequently disclosing the SAR.

Mendoza is scheduled to be sentenced on May 25 and faces a statutory maximum penalty of 95 years in federal prison.

FinCen believes Mendoza is the first bank official in the nation to be convicted of criminal charges for revealing the filing of a SAR.